Kris Faafoi
Kris Faafoi
"The Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill passed its first reading last night. The amendments in this Bill will align us with international regulations made to strengthen the resilience of global financial markets and reduce risk.”
He said the bill was critical to ensure financial institutions that relied on derivatives could continue to transact seamlessly in international markets.
“Financial institutions like the Super Fund, ACC and banks use derivatives to hedge against factors such as currency risks when they make investments or raise money offshore.
“Being able to access the global financial markets ensures these entities can invest and raise funds cheaply and efficiently. This ultimately benefits New Zealand consumers and businesses, who are the end-users of these entities.”
He said, while the changes were complex and technical, they not only brought New Zealand into line with international best practice but also avoided potentially substantial damage to the economy.
“Without these amendments, New Zealand’s financial institutions could lose access to offshore funding markets because they don’t comply with new requirements that have resulted from overseas reforms.
“Not having access to these markets could also see an increase in the cost of raising capital, leading to higher interest rates. This would affect all New Zealanders, directly or indirectly, potentially costing millions of dollars to the economy. It could also have a negative impact on financial stability, if it meant New Zealand entities were raising funds from riskier sources or were no longer able to hedge certain risks.
“By progressing this legislation, the Government is future-proofing a significant part of our financial markets for the benefit of all New Zealanders.”
The bill is now referred to the Finance and Expenditure select committee with a report back to the House by July 22.
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